ALTHOUGH it took a little time for the penny to drop, Middle Britain is set to pick up the biggest tab from Chancellor George Osborne’s latest Budget package.

While young, single workers on low incomes enjoy a rise in their personal allowance – the amount they can earn before they pay income tax – from £8,105 in April 2012 to £9,205 in April 2013, pensioners who have saved for years to build a private pension to boost their state pension are being hit by the controversial “granny tax”.

By freezing the age-related allowance at £10,500 for 65 to 74-year-olds and at £10,600 for over-75s from April 2013, bringing it into line, gradually, with the allowance for workers, Osborne aims to collect an extra £3.3 billion in revenue over four years.

The impact therefore falls on pensioners with an income of between £10,500 and £24,000, which means many have a second pension of £5,000 to £19,000 to top up their basic state pension.

However, Andrew Morris, managing director of Bristol-based Signature, is not entirely surprised that older folk have been targeted this time.

“Interesting demographic changes are going on in society,” he says.

“Beyond 60, many people are wallowing in the golden age of pensions.

“If they finished their working lives debt and mortgage-free, they couldn’t be happier.”

He added: “For those in their 50s, the world looks very different.

“They may have re-mortgaged to help the kids into university or buy a home, and many expect to work long beyond 60 to get even half decent pensions.

“In the private sector, many workers have been switched, despite their reluctance, to inferior defined contribution pensions.”

Pensioners’ anger at Osborne’s package is probably intensified by the fact that beyond 65 it is difficult for many people to significantly change their financial circumstances.

This is because few will still be in regular work.

Treasury figures show that from April 2013, some 4.41 million pensioners will be worse off in real terms with an average loss of £83 per year.

Some 360,000 rather angry 65-year-olds stand to lose an average of £285 each.

However, Tom McPhail, head of pensions research at financial adviser Hargreaves Lansdown, thinks the outcry is slightly overdone.

“The so-called ’granny tax’ was nothing of the kind,” he says.

“With the up-rating of the personal allowance, the generous increase to the state pension (and the triple lock guaranteed to keep it in line with average earnings) and confirmation of the planned reform to the state pension, the abolition of the age-related allowance was a sensible measure.”

David Black, at financial data agency Defaqto, sees the Budget as a wake-up call for those in sight of retirement, say 45-plus.

An obvious first step, he says, is to contact the state pension forecasting service.

“If you’re unable to save any more, at least you’ll be aware of what the future holds and may be able to do research to see if other state benefits might be available to you,” he said.